Euroseas Ltd. Expects Favorable Market Conditions Through the End of 2022

Euroseas Ltd. (NASDAQ: ESEA, the “Company” or “Euroseas”), an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced its results for the three-month period ended March 31, 2021.

First Quarter 2021 Financial Highlights:

Total net revenues of $14.3 million. Net income of $3.8 million; net income attributable to common shareholders (after a $0.1 million of dividend on Series B Preferred Shares and a $0.1 million of preferred deemed dividend arising out of the redemption of approximately $2 million of Series B Preferred Shares in the first quarter of 2021) of $3.6 million or $0.53 per share basic and diluted. Adjusted net income attributable to common shareholders1 for the period was $3.0 million or $0.45 per share basic and diluted.

Adjusted EBITDA1 was $5.6 million.

An average of 14.0 vessels were owned and operated during the first quarter of 2021 earning an average time charter equivalent rate of $12,134 per day.

The Company declared a dividend of $0.1 million on its Series B Preferred Shares. The dividend will be paid in cash.

Additional announcement:

The Company has completed its first Environment, Social & Governance (“ESG”) report which will be available on its web site on May 26, 2021.

Aristides Pittas, Chairman and CEO of Euroseas commented: “Over the last three months, the containership markets have continued their upward path exceeding their previous peak of 2008 and coming within reach to challenge their all-time highs last observed in 2005. Recovering demand and inefficiencies in container transport logistics, like port congestion, crew replacement and COVID related protocols, have been combined with modest supply growth to support the present market levels. The higher rates, naturally, have had a very positive effect on our profitability which is to further increase as the remaining of our vessels will renew their legacy charters during the following 4-5 months. In addition to chartering our vessels at higher rates, the strong market has allowed us to pursue charters of longer periods, of two or more years, thus, establishing visibility of our earnings well into next year and even 2023.

“We believe that the favorable market fundamentals will continue over the remainder of this and the next year as world economies are projected to continue recovering from their pandemic induced slowdowns and to register strong growth rates while, in parallel, vessel deliveries are expected to be modest over the same period.

“Our strategy is focused on ensuring that Euroseas remains a significant participant in the feeder/intermediate containership segment, expanding in a risk measured and accretive manner and using our public listing as a potential platform to consolidate privately owned vessels or fleets. Furthermore, as our liquidity increases, we are evaluating possible uses of any accumulated funds in terms of further deleveraging our balance sheet, exploiting investment opportunities or rewarding our shareholders by re-instituting common stock dividends.

“Finally, we are pleased to have completed our first Environment, Social & Governance report. Our ESG responsibilities is an integral part of our strategy and our overall success and we look forward to regularly communicating our progress on this front to our shareholders and investors.”

Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the first quarter of 2021 reflect the increased charter rates our vessels earned due to the major recovery of the market compared to the same period of last year. Our net revenues decreased to $14.3 million in the first quarter of 2021 compared to $15.4 million during the same period of last year due to the lower number of vessels we operated in the first quarter of 2021. During the first quarter of 2021 we operated 14.0 vessels versus 19.0 vessels during the same period of last year.

“On a per-vessel-per-day basis, our vessels earned a 26.2% higher average charter rate in the first quarter of 2021 as compared to the same period of 2020. Again, on a per-vessel-per-day basis, the sum of vessel operating expenses, management fees and general and administrative expenses increased by 17.6% during the first quarter of 2021 as compared to the same period in 2020 which was attributable to increased supply of stores, increase in hull and machinery insurance premiums and the increased crewing costs for our vessels compared to the same period of 2020, resulting from difficulties in crew rotation due to COVID-19 related restrictions. We believe that we continue to maintain one of the lowest operating cost structures amongst the public shipping companies which is one of our competitive advantages.

“Adjusted EBITDA during the first quarter of 2021 was $5.6 million compared to $4.1 million achieved for the first quarter of 2020.”

“Finally, as of March 31, 2021, our outstanding debt (excluding the unamortized loan fees) is about $65.1 million versus restricted and unrestricted cash of about $6.4 million.”

First Quarter 2021 Results:

For the first quarter of 2021, the Company reported total net revenues of $14.3 million representing a 7.3% decrease over total net revenues of $15.4 million during the first quarter of 2020. On average, 14.0 vessels were owned and operated during the first quarter of 2021 earning an average time charter equivalent rate of $12,134 per day compared to 19.0 vessels in the same period of 2020 earning on average $9,615 per day. The Company reported a net income for the period of $3.8 million and a net income attributable to common shareholders of $3.6 million, as compared to a net income of $2.0 million and a net income attributable to common shareholders of $1.8 million for the first quarter of 2020.

Vessel operating expenses for the first quarter of 2021 amounted to $6.9 million as compared to $8.0 million for the same period of 2020. The decreased amount is due to the lower number of vessels owned and operated in the first quarter of 2021 compared to the corresponding period of 2020, partly offset by the increased crewing costs for our vessels compared to the same period of 2020, resulting from difficulties in crew rotation due to COVID-19 related restrictions, the increased supply of stores and the increase in hull and machinery insurance premiums. Depreciation expense for the first quarter of 2021 amounted to $1.6 million compared to $1.7 million for the same period of 2020 due to the decreased number of vessels in the Company’s fleet. Related party management fees for the first quarter of 2021 decreased to $1.1 million from $1.3 million for the same period of 2020 for the same reason. In the first quarter of 2021 and 2020, none of our vessels underwent drydocking and certain expenses were incurred in connection with upcoming drydockings; finally, during the first quarter of 2021, we had other operating income of $0.2 million relating to settlement of accounts with charterers of sold vessels.

Interest and other financing costs for the first quarter of 2021 amounted to $0.7 million compared to $1.3 million for the same period of 2020. This decrease is due to the decreased amount of debt and the decrease in weighted average LIBOR rate in the current period compared to the same period of 2020. For the three months ended March 31, 2021 the Company recognized a $0.48 million loss on its interest rate swap contract, comprising a $0.52 million unrealized loss and a $0.04 million realized gain.

Adjusted EBITDA1 for the first quarter of 2021 was $5.6 million, compared to $4.1 million achieved for the first quarter of 2020. Please see below for Adjusted EBITDA reconciliation to net income.

Basic and diluted earnings per share for the first quarter of 2021 was $0.53, calculated on 6,711,408 basic and 6,749,393 diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $0.32 for the first quarter of 2020, calculated on 5,576,960 basic and diluted weighted average number of shares outstanding.

Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain on derivatives and the loss on sale of vessel, the adjusted earnings per share for the quarter ended March 31, 2021 would have been $0.45 per share basic and diluted, respectively, compared to adjusted earnings of $0.17 per share basic and diluted for the first quarter of 2020, after excluding amortization of below market time charters acquired. Usually, security analysts do not include the above items in their published estimates of earnings per share.

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